Credit Suisse’s Phil Winslow this morning offers up a massive (99-page) note that he calls “The Apps Revolution Manifesto — Volume 1″, the point of which is to describe what he calls a “paradigm shift in enterprise software architectures.”
The world is at the “most significant revolution in database and application architectures in 20 years,” writes Winslow.
Winslow describes four aspects of the shift, namely, the transformation of the user interface via mobile, the transformation of “back end” technologies in “cloud computing,” the rise of “new classes and volumes of data,” the so-called Big Data revolution, and an acceleration of the gathering, analysis, and sharing of data, called “Fast Data.”
The convergence of all of that is like the “client-server” revolution in the early ’90s, he thinks, or the rise of Web-based software a decade ago.
The result, writes Winslow, should be a much healthier enterprise software market than is currently anticipated by investors:
The next application modernization cycle, which we expect to gain momentum throughout 2012 and extend well into 2015 (if not beyond), will not only (1) drive an upgrade cycle of legacy applications, but also (2) expand the user base and penetration of applications and incremental modules, and (3) produce new generations of enterprise software companies and �killer apps.� Therefore, we believe that Wall Street�s view of enterprise applications being a mature, low-growth market will be proven wrong. Specifically, consensus estimates across the 25 largest publicly traded applications vendors forecast a sizeable deceleration in revenue growth from approximately 15% in 2011 to approximately 11% in 2012. Similarly, Gartner forecasts enterprise applications revenue growth to ! slow fro m approximately 12-13% in 2011 to approximately 9% and 8-9% in 2012 and 2013, respectively. Conversely, we believe that (at least) mid-teens revenue growth rates can be sustained for several years.
Winslow expects some of the dominant software vendors can be competitive despite the shifting nature of the business:
Although privately-held Workday most closely embodies the fourth-generation application architecture paradigm described in our report, we view SAP (SAP), Oracle (ORCL), NetSuite (N), and Salesforce.com (CRM) as the publicly-traded vendors most leveraged to this next wave of application modernization and expansion. Conversely, we anticipate that many legacy applications vendors (e.g., Sage [Group PLC (SGEL)], Epicor, and JDA Software (JDAS)) will experience erosions in their competitive positioning and market share.
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